Commodities From Oil to Copper Slump on Cyprus Concerns

Commodities fell by the most in two
weeks as outrage in Cyprus rekindled concern that Europe’s debt
crisis may deepen, hurting demand prospects for raw materials
from oil to copper. Gold rose.

The Standard & Poor’s GSCI Spot Index of 24 raw materials
fell as much as 1.2 percent, the biggest drop since March 1, and
was at 645.70 at 11:28 a.m. London time. Copper in London
dropped by the most in five months, pacing declines in
industrial metals, while crude oil in New York headed for the
biggest loss since March 1.

Euro-area finance ministers reached an unprecedented
agreement on March 16 forcing depositors in Cypriot banks to
share in the cost of the latest bailout. The 17-nation currency
fell to its lowest level this year against the dollar as
investors sought haven assets.

“The Cyprus issue is the biggest driver of sharp falls in
commodities across the board as that is pushing the euro lower
and the dollar higher,” Lelia Kim, a trader at Seoul-based Tong
Yang Securities Inc., said by phone today. “Coupled with weak
data out of the U.S., which is ruining recent recovery optimism,
industrial metals are being hit hardest, while gold is rising on
safe haven demand.”

Copper for delivery in three months dropped as much as 2.7
percent, the biggest loss since Oct. 19, to a four-month low of
$7,545.75 a metric ton on the London Metal Exchange. Zinc lost
1.5 percent, lead fell 1.9 percent and aluminum declined 1.1
percent.

The Thomson Reuters/University of Michigan preliminary U.S.
consumer sentiment index for March fell to 71.8, the lowest
level since December 2011, from 77.6 in February. The gauge was
projected to increase to 78, according to the median estimate of
67 economists surveyed by Bloomberg.

‘Flight to Safety’

“It’s a classic flight to safety as a result of the sharp
move higher of the dollar,” Steven Dooley, Melbourne-based head
of research at brokerage Forex Capital Trading Pty Ltd., said
today by phone. “Cyprus is more like an aftershock after the
global financial and the European debt crises. I expect each
shock like this to be less and less severe, but a lot depends on
how the authorities manage it.”

Gold for immediate delivery advanced as much as 1.1 percent
to $1,608.60 an ounce, the highest since Feb. 27, before trading
at $1,603.09. The Dollar Index, a gauge that measures the
strength of the greenback against six major rivals, jumped 0.4
percent to 82.623. The euro fell 0.9 percent to $1.2954.

Cypriot President Nicos Anastasiades will try to persuade
lawmakers in Nicosia to ratify the levy today, which would raise
5.8 billion euros ($7.5 billion). Scenes of Cypriots lining up
at cash machines raised the specter of capital flight elsewhere.
Cyprus accounts for less than half of a percent of the euro
region’s economy.

Crude Oil

West Texas Intermediate crude fell from the highest level
in three weeks as Libya shut an oil pipeline after protests.
Futures for April delivery slipped 1 percent to $92.49 a barrel
in New York.

“Cyprus is not a critical part of the global oil industry,
it’s just another one of many crises that’s not an existential
threat anymore to the Euro,” Jeremy Friesen, a commodity
strategist at Societe Generale SA in Hong Kong, said by phone
today. “But it does highlight problems in the euro zone with an
inability to keep credit loose and prevent really slow growth.
The weakness in oil prices is more driven by a stronger dollar
than any indication of weaker growth globally.”